Spatial distribution, microhabitat use and territorial and feeding behaviours were compared between the juveniles of two sympatric territorial damselfishes Stegastes variabilis and Stegastes fuscus on a small tropical reef in the south-western Atlantic Ocean. Juvenile S. variabilis were most abundant at sites subject to stronger hydrodynamics and with mixed benthic cover, whereas juvenile S. fuscus were most abundant at sheltered sites with dense turf algae cover. No differences regarding feeding habits were detected, with both species preferentially feeding on turf algae. Also, despite similarities in territory area and agonistic encounter rates, the identity and proportion of intruders involved in agonistic interactions differed significantly between species. These interdependent traits suggest strong asymmetric competition, with juvenile S. fuscus dominating high-quality sites and evicting juvenile S. variabilis to low quality, marginal areas of the reef.